UNITED STATES OF AMERICA
Before the
SECURITIES AND EXCHANGE COMMISSION
INVESTMENT ADVISERS ACT OF 1940
Release No. 1714 / April 13, 1998
ADMINISTRATIVE PROCEEDING
File No. 3-9577
______________________________
)ORDER INSTITUTING PUBLIC
In the Matter of )ADMINISTRATIVE AND CEASE-AND-
ROTHSCHILD INVESTMENT )DESIST PROCEEDINGS, MAKING
CORPORATION )FINDINGS AND IMPOSING SANCTIONS
)PURSUANT TO SECTIONS 203(e) AND
Respondent. )203(k) OF
)THE INVESTMENT ADVISERS
______________________________)ACT OF 1940.
I.
The Securities and Exchange Commission (Commission) deems it
appropriate and in the public interest to institute public
administrative and cease-and-desist proceedings pursuant to
Sections 203(e) and 203(k) of the Investment Advisers Act of 1940
(Advisers Act) against Rothschild Investment Corporation
(Rothschild).
In anticipation of the institution of these proceedings,
Rothschild has submitted an Offer of Settlement (Offer), which
the Commission has determined to accept. Solely for the purpose
of these proceedings and any other proceedings brought by or on
behalf of the Commission or to which the Commission is a party,
and without admitting or denying the Commission's findings,
except as to jurisdiction and the finding contained in Paragraph
II.A. below, which are admitted, Rothschild, by its Offer,
consents to the entry of this Order Instituting Administrative
and Cease-and-Desist Proceedings, Making Findings and Imposing
Sanctions Pursuant to Sections 203(e) and 203(k) of the
Investment Advisers Act of 1940 (Order).
ACCORDINGLY, IT IS ORDERED that public administrative and cease-
and-desist proceedings pursuant to Sections 203(e) and 203(k) of
the Advisers Act be, and hereby are, instituted.
II.
On the basis of this Order and the Offer submitted by Rothschild,
the Commission finds that:
A. Rothschild has been dually registered with the Commission as an
investment adviser and as a broker-dealer since 1971.
B. In 1976, Rothschild began to use riskless proprietary accounts with its
clearing brokerage firm to effect trades involving bonds and over-the-counter
stocks for its advisory clients' accounts. Rothschild continued this
practice, using three successive clearing firms, through at least
December 1995.
C. During 1994 and 1995, Rothschild effected approximately 3,750
riskless principaltransactions with its advisory clients without
obtaining the consent of those clients.As a result of this
conduct, Rothschild willfully violated Section 206(3) of the
Advisers Act.
D. Although Rothschild did disclose in Part II of its 1994 and 1995
amendments to Form ADV that it engaged in riskless principal transactions
with advisory clients, it did not give its clients a copy of Part II
of its Form ADV. Instead, Rothschild provided a brochure which,
unlike the Form ADV, failed to disclose that Rothschild engaged in
riskless principal transactions with its advisory clients. As a
result of this conduct, Rothschild willfully violated Section 204
of the Advisers Act and Rule 204-3 thereunder.
III.
In view of the foregoing, the Commission deems it appropriate and
in the public interest to impose the sanctions specified in the
Offer submitted by Rothschild.
ACCORDINGLY, IT IS ORDERED:
A. That Rothschild cease and desist from committing or causing any
violation, and any futureviolation, of Sections 204 and 206(3) of
the Advisers Act and Rule 204-3 thereunder; and
B. That Rothschild shall, within thirty days of the entry of this
Order, pay a civil moneypenalty in the amount of $15,000 to the
United States Treasury. Such payment shall be:(A) made by United
States postal money order, certified check, bank cashier's check
orbank money order; (B) made payable to the Securities and
Exchange Commission; (C)hand-delivered or mailed to the
Comptroller, Securities and Exchange Commission,Operations
Center, 6432 General Green Way, Stop 0-3, Alexandria, VA 22312;
and (D)submitted under cover letter that identifies Rothschild as
a Respondent in theseproceedings, the file number of these
proceedings, a copy of which cover letter and moneyorder or check
shall be sent to Mary E. Keefe, Regional Director, Securities and
ExchangeCommission, Midwest Regional Office, 500 West Madison
Street, Suite 1400, Chicago,IL 60661-2511.
By the Commission.
Jonathan G. Katz
Secretary
SERVICE LIST
Rule 141 of the Commission's Rules of Practice provides that the
Secretary, or another duly authorized officer of the Commission,
shall serve a copy of the Order Instituting Administrative and
Cease-and-Desist Proceedings, Making Findings and Imposing
Sanctions on each person named as a party in the Order and their
legal agent.
The attached Order Instituting Administrative and Cease-and-
Desist Proceedings, Making Findings and Imposing Sanctions
pursuant to Sections 203(e) and 203(k) of the Investment Advisers
Act of 1940 has been sent to the following parties and other
persons entitled to notice:
Brenda Murray
Chief Administrative Law Judge
Securities and Exchange Commission
450 Fifth Street, N.W., Stop 11-6
Washington, D.C. 20549
John S. Markle
Division of Enforcement
Securities and Exchange Commission
450 Fifth Street, N.W., Stop 4-1
Washington, D.C. 20549
Mary E. Keefe
Regional Director
Securities and Exchange Commission
Midwest Regional Office
500 West Madison Street
Suite 1400
Chicago, Illinois 60661-2511
Rothschild Investment Corporation
c/o Richard F. Karger, President
311 South Wacker Drive, Suite 6500
Chicago, Illinois 60606
Robert W. Edler
Thiedmann & Edler
30 South Wacker Drive, Suite 2810
Chicago, Illinois 60606
(Attorney for Rothschild Investment Corporation)